Tobacco industry

Last updated on 28 July 2017

The tobacco industry comprises those persons and companies engaged in the growth, preparation for sale, shipment, advertisement, and distribution of tobacco and tobacco-related products. It is a global industry; tobacco can grow in any warm, moist environment, which means it can be farmed on all continents except Antarctica.

Tobacco, one of the most widely used addictive substances in the world, is a plant native to the Americas and historically one of the half-dozen most important crops grown by American farmers. More specifically, tobacco refers to any of various plants of the genus Nicotiana (especially N. tabacum) native to tropical America and widely cultivated for their leaves, which are dried and processed chiefly for smoking in pipes, cigarettes, and cigars; it is also cut to form chewing tobacco or ground to make snuff or dipping tobacco, as well as other less common preparations. From 1617 to 1793 tobacco was the most valuable staple export from the English American mainland colonies and the United States. Until the 1960s, the United States not only grew but also manufactured and exported more tobacco than any other country.

Tobacco is an agricultural commodity product, similar in economic terms to agricultural foodstuffs: the price is in part determined by crop yields, which vary depending on local weather conditions. The price also varies by specific species or cultivar grown, the total quantity on the market ready for sale, the area where it is grown, the health of the plants, and other characteristics individual to product quality.

Since 1964 conclusive medical evidence of the deadly effects of tobacco consumption has led to a sharp decline in official support for producers and manufacturers of tobacco, although it contributes to the agricultural, fiscal, manufacturing, and exporting sectors of the economy. Laws around the world now often have some restrictions on smoking, but almost 6 trillion cigarettes are still produced each year, representing over a 12% increase since the year 2000.[1] China accounts for over 40% of current world production.[1] Tobacco is often heavily taxed to gain revenues for governments and as an incentive for people not to smoke.[2]

History

For a history of how tobacco has been grown and marketed, see tobacco, smoking and articles on similar topics.

Position of industry

The phrase "tobacco industry" generally refers to the companies involved in the manufacture of cigarettes, cigars, snuff, chewing tobacco and pipe tobacco. China National Tobacco Co. has become the largest tobacco company in the world by volume. Following extensive merger and acquisition activity in the 1990s and 2000s, four firms dominate international markets - in alphabetical order:

Altria, formerly called the Philip Morris Cos. (Philip Morris Companies Inc.), still owns the Philip Morris tobacco business in the United States, but Philip Morris International has been fully independent since 2008. In most countries these companies either have long-established dominance, or have purchased the major domestic producer or producers (often a former state monopoly). Until 2014 the United States had one other substantial independent firm, Lorillard, which Reynolds American, Inc. acquired. India has its own major player, ITC Limited (25.4%-owned by British American Tobacco). A small number of state monopolies survive, as well as some small independent firms.

Tobacco advertising is becoming increasingly restricted by the governments of countries around the world citing health issues as a reason to restrict tobaccos appeal

Industry outlook in the United States

Anti-smoking ad, 1905

The tobacco industry in the United States has suffered greatly since the mid-1990s, when it was successfully sued by several U.S. states. The suits claimed that tobacco causes cancer, that companies in the industry knew this, and that they deliberately understated the significance of their findings, contributing to the illness and death of many citizens in those states.

The suit resulted in a large cash settlement being paid by a group of tobacco companies to the states that sued. Further, since the suit was settled, other individuals have come forth, in class actionlawsuits, claiming individual damages. New suits of this nature will probably continue for a long time.

Since the settlement is a heavy tax on the profits of the tobacco industry in the US, regressive against smokers, and further settlements being made only add to the financial burden of these companies, it is debatable if the industry has a money-producing long term outlook.

The tobacco industry has historically been largely successful in this litigation process, with the majority of cases being won by the industry. During the first 42 years of tobacco litigation (between 1954 and 1996) the industry maintained a clean record in litigation[4] thanks to tactics described in a R.J. Reynolds Tobacco Company internal memo as "the way we won these cases, to paraphrase Gen. Patton, is not by spending all of Reynolds' money, but by making the other son of a bitch spend all of his."[5] Between 1995 and 2005 only 59% of cases were won by the tobacco industry either outright or on appeal in the US,[6] but the continued success of the industry's efforts to win these cases is questionable. In Florida, the industry has lost 77 of the 116 "Engle progeny" cases that have gone to trial.[7] The U.S. Supreme Court has also denied the industry's major grounds for appeal of Engle cases.[8]

In June 2009, U.S. President Barack Obama signed into law the Family Smoking Prevention and Tobacco Control Act which has been called a "sweeping anti-smoking" bill.[9] Among other restrictions, this Act banned the use of any constituent, additive, herb or spice that adds a "characterizing flavor" to the tobacco product or smoke (Section 907)(a)(1)(A).[10] The aim of this ban is to prevent children and teenagers from becoming addicted to cigarettes at a young age with the US Department of Health and Human Services citing that "studies have shown that 17 year old smokers are three times as likely to use flavored cigarettes as are smokers over the age of 25".[11] This ban however does not apply to menthol cigarettes, which are exempt from the bill.

Lawsuits against the tobacco industry are primarily restricted to the United States due to differences in legal systems in other countries. Many businesses class ongoing lawsuits as a cost of doing business in the US and feel their revenue will be only marginally affected by the activities.

Tobacco control

On May 11, 2004, the U.S. became the 108th country to sign the World Health Organization's Global Treaty on Tobacco Control. This treaty places broad restrictions on the sale, advertising, shipment, and taxation of tobacco products. The U.S. has not yet ratified this treaty in its senate and does not yet have a schedule for doing so.

Most recently, there has been discussion within the tobacco control community of transforming the tobacco industry through the replacement of tobacco corporations by other types of business organizations that can be established to provide tobacco to the market while not attempting to increase market demand.[13]

On February 20, 2007, the US Supreme Court ruled that the Altria Group (formerly Philip Morris) did not have to pay $79.5 million in punitive damages awarded to Mayola Williams in a 1999 Oregon court ruling, when she sued Phillip Morris for responsibility in the cancer death of her husband, Jesse Williams.[14] The Supreme Court's decision overturns a ruling made by the Oregon Supreme Court that upheld the award.[15]

On April 3, 2008, The U.S. Court of Appeals for the Second Circuit threw out a $800 billion class-action lawsuit filed on behalf of a group or class of people who smoked light cigarettes. The plaintiffs' lawyers were confident that they would be able to win this suit due to the success of the Schwab case [16] wherein tobacco companies were found guilty of fraud-like charges because they were selling the idea that light cigarettes were safer than regular cigarettes. The ruling by the three-judge panel will not allow the suit to be pursued as a class, but instead need proof for why individual smokers chose light cigarettes over regular cigarettes.[17]

Tobacco industry in popular culture

The tobacco industry has had a long relationship with the entertainment industry. In silent era movies, back-lit smoke was often used by filmmakers to create sense of mystery and sensuality in a scene. Later, cigarettes were deliberately placed in the hands of Hollywood stars as an early phase of product placement,[18] until health regulating bodies tightened rules on tobacco advertisement and anti-smoking groups pressured actors and studio executives against such tactics. Big Tobacco has since been the subject focus of films such as the docudramaThe Insider (1999) and Thank You For Smoking (2005).

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